Gold Cracks US$1,000

Gold’s day-long breach of the US$1,000-per-oz.-mark was the biggest news for gold bugs around the world in early September.

• Gold leaped US$50 and had an all-time nominal high fix of US$1,004.50 per oz. in London on Sept. 8. It then traded briefly above US$1,005 per oz. before falling back to the mid-US$990s. That exceeds the past year’s US$994-per-oz. high reached in February 2009 and the all-time nominal high of US$1,002.80 attained in March 2008. Gold is now holding solidly above its 1980 spike of US$850 per oz., which would be well north of US$2,000 per oz. in today’s dollars.

The big-picture reasons for gold’s inevitable ascendance have been expounded upon in these pages for more than a decade, but this latest, brief surge above US$1,000 per oz. seems to be rooted in new and widening doubts that the U. S. government has any inclination to protect the value of the greenback. The already excessive debt loads that doubled under the Bush Administration are now set to double again under the Obama Administration, and that’s without any new socialized health care plan.

The 1960s counterculture radicals who now run the U. S. government are keenly aware that crises — real or cynically provoked — are exceedingly useful times to consolidate power and rapidly push unpopular agendas past a frightened and off-balance electorate.

It’s a smart, if misguided, bunch running the show in the U. S. now, so more people are coming to realize with some horror that the relentless hollowing out of the greenback’s value is a preferred, chosen policy option that advances the government’s wider agenda to increase its power at the expense of Wall and Main Streets alike.

It all plays into gold’s perennial role as a store of value in turbulent times, and those who understand its role stand to benefit. The gold price is behaving as predicted now that U. S. debt in its myriad forms is spiralling well beyond the point of normal repayment and into the painful realm of future massive currency devaluation.

• The world’s largest gold miner, Barrick Gold, has signed up to the unconventional Silver Wheaton financing program by selling 25% of the life-of-mine silver production from the Pascua-Lama project and 100% of silver production from the Lagunas Norte, Pierina and Veladero mines until project completion at Pascua- Lama. Barrick will get US$625 million payable over three years plus ongoing payments for silver delivered under the agreement.

But that is small potatoes compared to Barrick’s new US$3- billion bought deal of 81.2 million shares at US$36.95 per share.

Barrick will earmark US$1.9 billion of net proceeds to eliminate all of its fixed priced gold contracts within the next 12 months and about US$1.0 billion to eliminate a portion of its floating spot price gold contracts. However, Barrick will record a US$5.6- billion charge to third-quarter earnings as a result of the ensuing accounting changes. This complete elimination of the remnants of Barrick’s controversial hedge book is the company’s first major move under new president and CEO Aaron Regent’s stewardship.

• A couple of junior boardroom squabbles got sorted out in favour of long-time management. Ulli Rath’s team stays on at Chariot Resources, as a dissident group led by Lundin Group members fell a few million votes short of ousting the incumbent board. And in dramatic fashion at Athabasca Potash’s annual meeting, recently turfed president, CEO and company founder Dawn Zhou and her alternate slate of directors retook control of the company and its Burr potash project in Saskatchewan.

• In a sign of how out-of-whack the copper markets have been this year, Xstrata’s high-quality Kidd metallurgical facilities in Timmins shut down their copper operations on Labour Day for seven to ten weeks. Xstrata blames the shutdown on a shortage of third-party copper concentrate, including one caused by the Vale Inco strike, which is looking to be a long one.

• In Indonesia, the national government has sent about 600 troops to help safeguard workers at Freeport-McMoRan Copper & Gold’s colossal Grasberg copper-gold mine, adding to the 2,500 or so security professionals linked to the mine.

The beef-up comes on the heels of the murder of an Australian employee, a local security guard and a policeman in July and a spate of shootings since then, possibly linked to the separatist Papua Independence Movement.

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